I have a ton of money in a checking account earning 0% interest. I thought about buying 3-month CDs with 2.25% interest (or 0.56% per 3 months), something short term so my money isn't locked up for long in case I need it.

However, I found high-yield corporate bonds for sale at by broker. I am very new to bonds, so I don't really know how it will work for me.

I screened for bonds that have maturity dates at around 3 months. Here is an example of one I found, a 10-year bond that just happens to be maturing in about 3 months:

Coupon: 7.175 Fixed
Issue Date: 06-18-2009
Maturity Date: 06-18-2019
Details: TELECOM ITALIA CAP S.A. Non Callable, Make Whole Calls, TELECOM ITALIA S.P.A. CUSIP: 872456AA6
Credit Rating: Ba1/BB+
Industry: Telephone
Price: 101.400
YTW: 2.122
YTM: 2.122

My broker says that if I were to buy 50 of them today (3-4-2019), the costs would be this:

Principal: $50,700.00
Min. Qty: 50
Settlement Date:03-07-2019
Accrued Interest: $787.26
Total Cost: $51,487.26

If I buy these bonds and wait until the maturity date, which is 3 months later, how much would I earn dollarwise? Is it actually the YTM: 2.122% for just 3 months, or is 2.122% an annual rate where 0.53% would be my actual 3-month earnings?

  • Where are you finding 90 day CDs paying that high of a rate? (And why aren't you just sticking the money in a high-yield savings account like Ally at 2.2% or Synchony at 2.25%?)
    – RonJohn
    Mar 5, 2019 at 7:52
  • 1
    You can get bonds as short as 4 weeks at 2.41% direct from the US treasury
    – Kevin
    Mar 5, 2019 at 22:10

1 Answer 1


The YTM is an annual rate, but note your effective rate would be better than the 0.53% you calculated because you actually have 107 days from the quote date until maturity instead of 3 months. You can approximate your actual rate of return during those 107 days with the formula 107/365 * 2.122% = 0.622%. But since you're settling 3 days later, the rate is actually slightly worse because you'll pay 3 more days of accrued interest.

Since you know the accrued interest, and it looks like this bond pays twice per year (which most do), you can calculate the actual rate of return like this:

  • Bond value at maturity: $50,000 * (1 + 0.07175/2) = $51,793.75
  • Amount you will pay: $51,487.26
  • Profit = $51,793.75 - $51,487.26 = $306.49
  • Return % = $306.49 / $51,487.26 = 0.595%

In this case it looks like you'd be better off from an APY stand-point with the 3 month CD at 2.25%, though you'll be limited to about 90 days. But check out high yield savings accounts too; oftentimes they are comparable to 3 month CD rates, and you have much more flexibility. (After a quick search I just found some at 2.20 and 2.25%.) Note that the effective rate on 107 days in a 2.25% savings account would be 0.660%, which is better than the bond.

  • Thanks a lot for the detailed explanation, this helps me tremendously in my understanding of bonds!
    – peppy
    Mar 5, 2019 at 7:47
  • 2
    Highest paying money market accounts in US are now paying 2.50% Mar 5, 2019 at 12:32
  • @BobBaerker what's the minimum deposit in those account? (For CapitalOne 360, it's $10K. OP says he has "a ton of money", but that's relative to what you think is a ton.)
    – RonJohn
    Mar 5, 2019 at 14:11
  • @RonJohn - the deposits vary and you'd have to look them up to see the amounts. The best rates are 2.50% : UFB at $25k and CIT Bank which is $25k or a deposit of $100 per month (I don't know if the $100 per month has fees) Mar 5, 2019 at 14:44
  • 1
    @RonJohn - Just saw an ad for United Bank at 2.50% , $25k minimum deposit (new money), 180-day rate guarantee. I surmise that if I searched, there might be more :->) Mar 5, 2019 at 21:56

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